What Is the Market Data Infrastructure Rule?

The Market Data Infrastructure Rule refers to a set of regulatory amendments adopted by the U.S. Securities and Exchange Commission (SEC) to modernize and improve the framework for the collection, consolidation, and dissemination of equity market data. Formally adopted in December 2020, the rule represents one of the most significant overhauls of the U.S. equity market data system in decades. It addresses long-standing concerns about the quality, speed, and competitiveness of market data feeds provided through the Securities Information Processors (SIPs), as well as the structure of the National Market System (NMS).

This rule is often referred to in the context of Regulation NMS, which governs the operations of U.S. equity markets and ensures fair and efficient market practices. The Market Data Infrastructure Rule aims to enhance transparency, promote competition, and support the evolving needs of market participants through updated data definitions, expanded access to core data, and greater flexibility for new data consolidators.

Historical Context

Prior to the adoption of the Market Data Infrastructure Rule, consolidated equity market data was distributed through SIPs operated under the Consolidated Tape Association (CTA) and the Unlisted Trading Privileges (UTP) Plan. These SIPs aggregated quote and trade data from multiple exchanges and disseminated it to the public. However, over time, many market participants began to rely on proprietary data feeds offered by exchanges, which provided faster and more detailed information than the SIPs.

This led to a two-tiered data system in which large institutions had access to premium, low-latency data, while retail investors and others relied on the slower SIP feeds. Critics argued that this disparity undermined fairness, transparency, and competition. In response, the SEC launched a rulemaking initiative to reform the structure of market data distribution in the national market system.

Key Provisions of the Rule

The Market Data Infrastructure Rule introduces several critical changes to the way equity market data is defined, aggregated, and disseminated:

Expanded Definition of Core Data

The rule redefines "core data" to include not only the national best bid and offer (NBBO) and last sale data, but also depth-of-book information and additional order types such as odd lots (orders for less than 100 shares), auction information, and certain administrative messages. This expansion aims to better reflect modern market conditions and improve the completeness of publicly available data.

Introduction of Competing Consolidators

Previously, a single SIP per plan was responsible for consolidating and disseminating market data. Under the new rule, the SEC allows for Competing Consolidators — entities registered with the SEC that can aggregate data from all exchanges and distribute it in competition with one another. This change is designed to break the monopoly of the legacy SIPs, stimulate innovation, reduce costs, and provide alternative options for consumers of market data.

Mandatory Data Content from Exchanges

Exchanges are now required to transmit detailed market data to all consolidators in a standardized format and at the same speed. This eliminates the latency advantage that exchanges had when distributing proprietary feeds and helps ensure that public data consumers receive information on equal terms.

Technical and Governance Reforms

The rule also introduces technical standards for data dissemination and formalizes governance practices among self-regulatory organizations (SROs), ensuring greater accountability in the management and oversight of the market data system.

Implications for Market Participants

For institutional and retail investors, the rule promises broader access to richer data at potentially lower costs. The inclusion of odd lots and depth-of-book data in the core offering allows a more accurate representation of market liquidity and trading activity. This is particularly relevant as odd-lot trades have grown in frequency due to the rise of algorithmic and retail trading strategies.

For data vendors and technology firms, the ability to become a Competing Consolidator opens new commercial opportunities. However, the technical and compliance demands of acting as a consolidator are significant, requiring investment in infrastructure and adherence to strict SEC requirements.

Exchanges may face reduced revenues from proprietary data sales, but the rule seeks to rebalance the economic incentives to encourage fairer competition and improve the overall quality of data available in the public domain.

Implementation Challenges

Despite its goals, the Market Data Infrastructure Rule has faced legal and operational challenges. Several exchanges have opposed the rule, arguing that it may interfere with intellectual property rights and distort market economics. Implementation has been delayed due to litigation and industry pushback, and its rollout continues to be subject to regulatory, legal, and technical adjustments.

The Bottom Line

The Market Data Infrastructure Rule represents a transformative step in modernizing how equity market data is distributed in the United States. By expanding the definition of core data, introducing competitive consolidators, and mandating equal access, the rule is intended to enhance transparency, foster innovation, and create a more level playing field for all market participants. While its full impact depends on ongoing implementation and industry adaptation, it addresses fundamental issues in the U.S. market data ecosystem that have persisted for over a decade.